A company issues $100,000 of its 10-year, 8% bonds to yeild 10% on January 1, Year 1. The bonds pay interest annually on December 31. The bonds were sold with a discount of $12,289. The amount of cash interest paid on the bonds in Year 1 is______________.

a. $7,017

b. $8,000

c. $8771

d. $10,000

I said b. $8,000.

$100,000 x 8% = 8,000

If this is correct please let me know. If not, don't give me the answer just explain to me how to get the correct answer. I really want to know how this is done.

Dr D

I believe that your answer of $8,000 is correct, just the way you got it. Your teacher incuded what I call a "screw factor" into the problem; an unneccessary piece of information intended to screw you up. That extra bit of information would have been needed to find out the % yield to to the buyer of the bond: $8000 return/$87711 invested = 9.12% yield.

Fr_Chuck

This site is not to be used to get someone to do your homework.

If you wish to explain the answer you beleive is right and why you think it is, we will be glad to expalin your answer.

I hope others will understand this and not just give people answers to thier homeword